Small-Cap EV Stocks Are No Longer Getting Wall Street Love
Mar 01, 2022
Wall Street isn't feeling much better after a rough run for small-cap electric-vehicle companies. Analysts aren't raising their ratings or price targets in response to recent stock drops.
Falling small-cap EV stocks are akin to a bloodbath. Companies are down an average of 28% year-over-year as of Tuesday trade. Moreover, stocks have fallen more than 70% on average from their 52-week highs. The majority of 52-week highs were recorded during March 2021.
The declines have not prompted Wall Street strategists to recommend purchasing the dip. Over 40% of experts covering small-cap EV companies rank the stocks as Buy. Six months ago, 54% of experts rated the stocks as Buy. Analysts' price forecasts have fallen in lockstep with stock prices.
A small-capitalization stock's average Buy-rating ratio is about 68%.
Lordstown Motors stock is the first example. Shares fell about 20% after fourth-quarter results were released on Monday morning, taking the company down around 26% year to year and nearly 88% from its March 2021 52-week high of nearly $22 per share.
Following results, Deutsche Bank economist Emmanuel Rosner reduced his price target from $7 to $3 per share. Jamie Perez, an analyst at R.F. Lafferty, reduced his price target from $7 to $4 per share. Both experts grade the stock as Hold.
In premarket trade, the shares were trading at $2.47, down around 3.9%. Futures on the S&P 500 and Dow Jones Industrial Average are both down approximately 0.6%.
Nine analysts in total cover Lordstown. Stock is rated Buy by none. One expert rated the stock as Buy six months ago. Three experts rated the stock as Buy a year ago.
Higher interest rates, inflation, and the crisis between Russia and Ukraine have dampened investor appetite for smaller and riskier businesses. However, the firms have also failed to match forecasts.
Management expected Lordstown's 2022 sales to be about $1.7 billion when it merged with a special purpose acquisition company or SPAC. Instead, the company is projected to make $30 million this year. On Monday, the business stated that it plans to ship around 500 automobiles this year.
Canoo stock has similar tendencies, although experts believe it has held up somewhat better than Lordstown. Canoo released its fourth-quarter results on Monday evening. In premarket trading Tuesday, the stock is down roughly 9% to about $5.3 per share. Canoo anticipates shipping around 4,500 automobiles in 2022. At the time of the SPAC acquisition, the business projected to ship 10,000 cars in 2022.
Analysts still prefer Canoo shares over Lordstown. According to Bloomberg, the firm is covered by four analysts, three of whom rate the stock as Buy. Nonetheless, when Canoo published results, the consensus analyst price target fell by around 25 cents per share. Perez of R.F. Lafferty reduced his price target from $21 to $20 per share. The current aggregate expert price target is $13.75 per share.
Analyst sentiment has been weakening for a variety of reasons that aren't related to recent quarterly results.
Faraday Future Intelligent Electric is covered by three analysts. Two analysts recommend the stock as Buy, with an average price target of $15. Half a year ago, all three analysts rated the stock as Buy, with a consensus expert price target of $21 per share.
Today, none of the seven experts tracking Electric Last Mile Solutions rank the company as a Buy. The consensus analyst price target is somewhat less than $5 per share. Six of the six analysts that track Electric Last Mile shares ranked the company as Buy six months ago. The median price target per share was about $17.
Stephen Volkmann, an analyst at Jefferies, is one of those disappointed with Electric Last Mile shares. He lowered the firm from Buy to Hold in early February when the business announced that its financial results for 2021 would be restated. Volkmann's price target has fallen from $18 to $2.50 per share.
It seems that investors cannot rely on analyst recommendations to improve results in small-capitalization EV equities. For firms to gain traction, they must begin producing and selling automobiles.